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The Future of 85% LTV Bundles

Federally-regulated lenders cannot lend more than 80% of a home’s value without the borrower gettingmortgage insurance. But a few banks have developed a way around that.
What they do is loan the borrower 75-80%loan-to-valueas a first mortgage. Then they facilitate a 5-10%LTVsecond mortgage with a separate private lender.
This allows for financing totalling 85% LTV with no insurance fee.
Optimum Mortgage, a division of Canadian Western Bank, had just such a product—until recently. It was called the Opti-85 Bundle, and here’s why it was pulled from the market.

Rate Hikes and Housing: TD Research

August 30, 2013 Rate Hikes and Housing: TD Research
In just a few short months, long-term mortgage rates have burst higher by almost ¾ of a percentage point. People naturally want to know if the hikes are sustainable, and how they’ll affect the overall housing market. TD Economics weighed in on these points in a report last week. Here’s a quick overview of the implications TD foresees, and some observations of our own…

  • Future Rates: TD projects a 2.25 percentage point jump in 5-year bond yields by 2017.

Variable vs. Fixed Rates - The Latest

As many as85%of newmortgagorsare choosing fixed rates, saysCAAMP. It makes you wonder, what is it going to take to get that number back to its historical average of ~65%?
For one thing, the fixed-variablespread(i.e., difference between fixed and variable rates) needs to widen. With today’s typical 5-year fixed at 2.84% and discounted variables at 2.45%, that spread is currently ~39basis points.
As a rough rule of thumb, when the fixed-variable spread hits 100 basis points, demand for variables noticeably increases.

First-Time Down Payments

A wide majority of first-time buyers-to-be plan to put down less than 20%, according tonew datafrom RBC/Ipsos.
Here's the breakdown of their expected down payments:
  • 10% or less (62%of respondents)
  • 11-20% (26% of respondents)
  • More than 20% (12% of respondents)
Over half of newbie homeowners will likely pay the maximumdefault insurancepremium to buy their home.* That maximum ranges from $2,750-$2,900 per $100,000 of purchase price (i.e., 2.75%-2.90%), depending on the source

The Market Pulse from Genworth

Last year’smortgage regulationsshrank the overallhigh-ratiomortgage insurancemarket by about 15%, according torecent estimatesfromGenworthCanada.
Those rule changes also eliminated high-ratio refinances and contributed to a 15% drop in housing sales last quarter versus Q1 2012.
Genworth CEO Brian Hurley spoke today onBNNabout the pulse of the market. Here are some of his insights of note (our comments initalics): 
  • As an insurer, "We make money by getting the risk right." That means "We've got to get the properties right," he told BNN.

OSFI Considering Mortgage Amortization Changes

Federal policy-makers are exploring additional mortgage rule tightening, CMT has confirmed.
A spokesperson from Canada’s banking regulator, The Office of the Superintendent of Financial Institutions Canada (OSFI), verified that it is looking at the issue of limiting amortizations to 25 years onconventional mortgages(those with 20%+ equity). Currently, those “low-ratio” mortgages can haveamortizationsup to 35 years.
OSFI is “doing some preliminary consultation with financial institutions” on the matter, said the spokesperson.

Flaherty Talks Another Bank into Higher Rates

On Friday, Manulife Bank posted its lowest rate ever on a 5-year fixed mortgage, 2.89%. It lasted for four days.
When our big brothers at theDepartment of Finance(DoF) caught wind of it, they dialed up Manulife and swayed the bank into raising its rate back to 3.09%.
“We don’t want a race to the bottom on mortgage rates by our financial institutions…,” said Finance Minister Jim Flaherty, as quoted byBloomberg. “I had one of my staff call (Manulife) and indicate my displeasure.”
Manulife responded today by saying: "After consulting with the Department of Finance, Manulife Bank has withdrawn the (2.

BoC Decision: Lower for Even Longer

Canadian macro-economists are mostly in agreement that theovernight rateshould go nowhere in the next 9-12+ months. And theBank of Canadagave no indication today that such projections are off the mark.
The Bank left Canada’s core lending rate unchanged at 1% for the 29th straight month, with no change in sight.
Part of the Bank’s reasoning is reflected in thesecommentsfrom its statement:
  • “Total CPI inflation has been somewhat more subdued than projected in the January MPR as a result of weaker core inflation and lower mortgage interest costs.

TD Takes Heat for its Collateral Mortgages

Author:Rob McLister, CMT
Published: January 28, 2013
Link to original article provided below

Collateral charge mortgages got more bad press on Friday after CBC’s Marketplace ranthis report. The gist of it is thatcollateral mortgages"effectively trap you at the bank," says the CBC (which is not entirely true… more on that below). TD Canada Trust, which sellsonlycollateral charge mortgages, was caught in CBC’s crosshairs. An undercover reporter went into a TD branch with a hidden camera, asking the mortgage rep what made TD mortgages different than those at other banks.

Canadian Mortgage Rates Hinge on the Americans

Link to original article at bottom of page.

Author:Rob McLister, CMT

If you want to know what’s moving Canadian mortgage rates, watch the American news. The reason? Canadian bonds are 95% correlated with American bonds (Treasuries) and bond yields are 97% correlated with 5-year fixed mortgage rates. (See:Yields and Fixed Mortgage Rates) In other words, Canadian rates are married to U.S. rates. So it’s no wonder that our mortgage rates are being shifted by things like the U.S.debt ceilingandfiscal cliff
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The Future of 85% LTV Bundles
Rate Hikes and Housing: TD Research
Variable vs. Fixed Rates - The Latest
First-Time Down Payments
The Market Pulse from Genworth

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